December 17, 2015—Medicaid would have received an additional $1.4 billion in rebates on the top 200 generic drugs for 2005 through 2014 if the rebate calculation for generic drugs contained an inflationary adjustment similar to the one applicable to brand-name drugs, the Department of Health and Human Services Office of Inspector General says in a new report. [ms-protect-content id=”2799″]
The report did not analyze how much more 340B covered entities would have saved during the same period if the rebate calculation for generic drugs contained the inflationary adjustment.
Manufacturers of brand-name drugs have to pay an additional rebate when a drug’s average manufacturer price (AMP) increases by more than a specified inflation factor. A drug’s 340B ceiling price, meanwhile, is calculated based on its AMP and its Medicaid unit rebate amount. As a result, when a brand-name drug’s price rises such that its manufacturer must pay an additional inflation-based Medicaid rebate, the manufacturer also must provide a deeper discount to 340B covered entities.
Congress passed legislation in early November extending the additional Medicaid rebate percentage to generic drugs, beginning with the first quarter of 2017.
For its study, the OIG reviewed the top 200 generic drugs, as ranked by Medicaid reimbursement, for each year from 2005 through 2014. It said 869 drugs were in the top 200 generic drugs at least once during the 10 years.
The OIG found that generic drug price increases exceeded the inflation factor applicable to brand-name drugs for 22 percent of the quarterly AMPs it reviewed. It said if the inflation penalty for brand-name drugs had been in place for generic drugs, Medicaid would have received $1.4 billion in additional rebates for the top 200 generic drugs from 2005 through 2014. It found that the additional rebates for the top 200 generic drugs increased most years, from more than $39 million in 2005 to more than $464 million in 2014.
“For 356 of the 869 drugs we reviewed, there was at least one quarter in which the drugs’ quarterly AMPs exceeded the inflation-adjusted baseline AMPs,” the OIG wrote. “We also noted that 139 drugs had quarterly AMPs exceeding their inflation-adjusted baseline AMPs for every quarter that the drugs were included in the review.”
“The AMP increases exceeding the specified statutory inflation factor were frequent and significant for some drugs,” the OIG continued. “For example, one drug had quarterly AMPs that exceeded the inflation-adjusted AMPs by an average of 200 percent for all 32 of the quarters that the drug was in the top 200 generic drugs. In another example, the quarterly AMPs exceeded the inflation-adjusted AMPs by an average of 2,363 percent for the 12 quarters that the drug was in the top 200.” The OIG did not identify the drugs in question.
Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) had requested the study as part of their investigation into rising generic drug prices. [/ms-protect-content]